How Adidas’ New CEO Plans to Overhaul Reebok

Reebok Liquid Factory Shoes
Reebok Liquid Speed running shoes.
Courtesy of Reebok.

When it comes to getting Reebok back on track, Adidas Group’s new CEO Kasper Rorsted has big plans.

While discussing the overall group’s successful third-quarter performance during a conference call today, Adidas’ new chief didn’t mince words when it comes to Reebok’s need for a major overhaul.

While the faltering brand — which has grappled with its relevance to the North American market for some time following Adidas’ 2005 purchase — managed to eke out a 7 percent revenue gain in the third quarter, Rorsted said the brand’s growth continues to lag.

We have to be realistic,” Rorsted said. “Reebok is growing slower than Adidas and our competition. And we’ve seen no growth in North America in the past three years. And lastly, the profitability is significantly below the group average. It’s time to get back to the gym and redouble efforts in Reebok.

The plan to address the brand’s challenges, Rorsted said, will involve the streamlining of Reebok’s Boston-based headquarters, a reduction in store count and multiple layoffs.

To allow for a new beginning of Reebok, we will move to a new home in Boston in 2017,” Rorsted said. “We have started the search for a new location, and we’ve initiated the sales process for Canton building that we’ve been in for many years.

The reshuffle, which will create a global brand team fully dedicated to Reebok, will result in about 150 layoffs, the CEO said.

We have approximately 950 positions in our current Reebok headquarters,” noted Rorsted. “Six hundred and fifty of those will move to the new location; 150 of the remaining 300 will be relocated mostly to Portland in the U.S.; and the remaining 150 positions will be eliminated.”

Rorsted said he will also reduce the number of Reebok U.S. factory outlets by half, and will limit the number of pickup stores and place his focus on new wholesale.

According to Adidas CFO Robin Stalker, by the end of the year the company will have closed 20 factory outlets — in addition to closures earlier in the year — and almost half of its Reebok FitHub concept stores. The closures will accelerate in 2017, he said.

Adidas expects to incur a one-time cost of about 30 million euros in the second half on the Reebok reboot.

We are committed to accelerate growth and sustainable profit improvement,” Rorsted said. “Reebok is an important member of our group, but it’s clear, like in sports, every member has to contribute to the success, and that is also our expectation to Reebok. And we will be fully focused to make sure that will take place.”

The restructuring of Reebok will also see the brand’s president Matt O’Toole take full responsibility for Reebok’s performance in North America as Adidas Group North America president Mark King shifts his focus fully on the Adidas brand.